Judge issues temporary restraining order against Hershey sale
By Marc Levy Associated Press Writer
HARRISBURG, Pa. (AP) – A state judge issued a temporary restraining order Wednesday against the sale of Hershey Foods Corp., after the Pennsylvania attorney general expressed alarm that the sale could go through without state review.
A spokesman for the charitable trust that controls the nation’s largest candy maker said it would appeal.
“We’re disappointed in the decision,” said Rick Kelly, a spokesman for the Hershey Trust Co., which controls 31 percent of Hershey Foods stock and 77 percent of the Hershey Foods voting stock.
The order is to last only until Judge Warren G. Morgan can rule on an underlying petition by Attorney General Mike Fisher on whether to review a sale of the candy maker, if and when it happens.
Fisher opposes the sale, contending that a devastating loss of jobs and tax base could result. Lawyers for the Hershey Trust Co. and Milton Hershey School, the trust’s sole beneficiary, contend that he has gone beyond the law to stop the sale and he has failed to show that a sale would damage the area’s economy.
“I am pleased the judge has stopped the sale to give us a chance to raise these issues,” Fisher said in a statement. “We need to step back and take a hard look at how a sale of Hershey Foods would affect the Hershey community. There is no reason for the trust and its board to rush out and sell this company without allowing me to represent the public’s interest and allowing the court to determine how a sale could hurt this community.”
The Hershey Trust Co. manages a $5.9 billion trust fund that finances the Milton Hershey School for disadvantaged children, the closest thing to an heir to the wealth of childless chocolate magnate Milton Hershey, who died in 1945.
Fisher has said he was alarmed at the pace that the company appeared to be seeking a sale, and wanted to give the judge time to rule on his petition seeking a review of a possible sale of the candy maker.
Before then, he hopes lawmakers will have time to consider a change to the charitable trusts law that he is drafting.
That proposed change would allow trustees to consider the interests of a community before selling the controlling stake in a for-profit company, thereby releasing them from their perceived duty as trustees to maximize the value of the trust’s assets.
The Hershey Trust Co. on July 25 announced that it had ordered Hershey Foods executives to seek bids on the company in an effort to diversify the trust’s holdings and protect the funding source for the Milton Hershey School, which educates and shelters nearly 1,300 students.
An attorney for the Hershey Trust Co. and Milton Hershey School, Jack Stover, argued before Morgan on Tuesday that “under prevailing law, the attorney general’s office has no authority to ask for the temporary injunction.”
He also said that bidders would get cold feet if the sale process were delayed or if the confidentiality of the process was compromised.
Jerry Pappert, the state’s first deputy attorney general, argued that the delay would not interfere with a sale process or force potential buyers to forfeit information about their bid. He said he believes that the trustees are worried that, if a sale does not go through, they will face shareholder lawsuits.
Nestle, Kraft Foods and Cadbury Schweppes are possible buyers, analysts said.
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